Texas should prohibit the state government from enacting ObamaCare

Texas should prohibit the state government from enacting a “healthcare exchange” under the Patient Protection and Affordable Care Act (PPACA).

In addition to declining Medicaid expansion, Texas should affirmatively decline to set up a healthcare “exchange.” As with the Medicaid expansion, Texas is under no obligation to create a healthcare exchange under the PPACA. The law was written in such a way that its drafters thought there would be sufficient incentive for states to create exchanges on their own. That has turned out to be untrue, and Texas is currently one of 32 states that have refused to do so. Indeed, Texas has already affirmatively acted to reject healthcare exchanges in both the 82nd and 83rd Legislatures, by refusing to pass bills that would have created a state-level exchange.

The fight before the courts is ongoing. A federal lawsuit is currently proceeding in Oklahoma arguing that Obamacare only provides federal subsidies for exchanges set up by the states, as opposed to the federal government. The subsidies allow the federal government to enforce the employer mandate in states that refused to set up their own exchange. Indeed, as Jonathan H. Adler and Michael F. Cannon explain in “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits under the PPACA,”

[T]he PPACA cannot function without state buy-in. The Obama administration’s response to state push-back has been to rewrite the statute by imposing, on both employers and individuals, taxes that Congress never authorized… Supporters and opponents agree the PPACA’s “entire structure” depends on the IRS’s interpretation of the statute, and that this dispute “could be a fatal blow to Obamacare.

This lawsuit could therefore have the effect of cancelling out parts of Obamacare in those states, like Texas, that have courageously refused to set up healthcare exchanges. This is yet another reason for Texas to ensure that it does not enact a state-level exchange.

Even though the federal government may set up an exchange for Texas residents to access, many of the PPACA’s worst provisions might not apply to federally created exchanges. Depending on the outcome of the Oklahoma lawsuit, refusing to set up an exchange may shield many Texas businesses from an employer mandate, which amounts to a tax of more than $2,000 per worker. It could also protect millions of Texans from the individual mandate, which amounts to a tax potentially as high as $2,085 for a family of four earning $24,000. However, Texas may prevent the application of such provisions by affirmatively rejecting the expansion and the exchanges specifically through a legislative action.

Texas should amend Subtitle G, Title 8, Insurance Code, to prohibit the establishment of a healthcare exchange.